Sprint Nextel to cut 4,000 jobs

January 18, 2008 7:56:28 AM PST
Wireless phone company Sprint Nextel Corp. said Friday it plans to slash 4,000 jobs and close 125 retail locations to gird itself for an expected slowdown in subscriber growth and revenue.Shares in the company, which has been struggling to keep up with rivals AT&T Wireless and Verizon Wireless, fell 23 percent in morning trading.

The job cuts and store closings aim to cut $700 million to $800 million a year in labor costs starting at the end of 2008. The company said it will book a charge in the first quarter to cover severance costs, but did not disclose the amount.

Sprint said it will also close 4,000 of its 20,000 third-party distribution points, such as stalls inside other consumer-electronics retailers. The retail store closures represent 8 percent of its 1,400 company-owned shops.

The company also said it could record a charge in the fourth quarter of 2007 for what's known as "goodwill impairment," reflecting the decreased value of its assets and share price. The company expects to issue its fourth-quarter earnings report Feb. 28.

Sprint finished the year with 53.8 million subscribers.

Friday's announcement follows several quarters of poor performance. Sprint has had trouble attracting new subscribers while also facing growing customer-service complaints.

The troubles prompted the company to oust Chief Executive Officer Gary Forsee and replace him with Dan Hesse, the former CEO of Sprint spin-off Embarq Corp.

The company's struggle dates back to Sprint's 2005 acquisition of Nextel Communications Inc., which has left it with incompatible networks, technical glitches, a customer base filled with credit-compromised subscribers and a dubious marketing effort.

Besides the layoffs and closings, Hesse and his staff are considering consolidating the company's operations at its operational headquarters in Overland Park, Kan.

Another pressing issue is whether to continue a planned commercial rollout next year of the company's Xohm-branded WiMax service, which has been criticized within the industry as too expensive and experimental.

The stock plunged $2.69, or 23.3 percent, to $8.88 in morning trading, falling as far as $8.85. That was Sprint's lowest share price since October 2002.

AT&T Wireless is a unit of AT&T Inc. Verizon Wireless is a joint venture between Verizon Communications Inc. and Vodafone Group Plc.